November 28, 2006	Tuesday	Ziqa'ad 6, 1427

KARACHI, Nov 27: The State Bank has been pushed to suspend its decision barring the banks from spending above certain amount in procurement of IT solutions.

Experts feel that the earlier decision to impose condition of obtaining NOC was to check corruption in IT solution procurement and its suspension could be a result of the central bank yielding to pressures from interests that were hurt because of the NOC condition.

On Saturday last the State Bank suspended its earlier decision regarding procurement of software. The SBP on November 14 announced that before entering into any contract for procurement of IT solutions or software involving an amount exceeding Rs10 million or making any further payments against all such contracts, which have already been executed, banks and DFIs will invariably seek NOC from the SBP.

The decision created anxiety in banking circles. Banking sources said that an influential bank about which a SBP report was prepared, immediately used its connections to get the decision reverted.

The banks have been investing huge sum of money in the IT solutions and software procurement for years and were unchecked. The report about the procurement of software not required for banks was prepared but the practice continued unabated.

Sources said that a large bank having 1,400 branches purchased new banking solutions in 2002. In 2006, four years after the purchase of the system only three branches were linked with the new system.

Similarly, another large bank procured IT solutions and software worth millions of dollars that was not applicable. Interestingly, the SBP internal report identified the corruption but the person responsible for the deal was unmoved as he was said to be well-connected in Islamabad.

“Now an influential bank is determined to eliminate the decision of the SBP which checks the free spending of depositors’ money,” said a high ranking banker.

“It has been observed by the State Bank that some of the banks are entering into contracts for procurement of IT solutions and software without ensuring compatibility of such solutions and software with their existing systems,” said SBP first circular which barred banks and DFIs from further procurement of software without NOC.

The spending on the new technology was so huge that it got second place in banking spending after newly-restructured salary packages.

“All banks and DFIs are advised to ensure strict compliance of the above instructions as any violation thereof would attract punitive action,” this was the state of urgency showed in the circular latter suspended.